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Jacksonville Mayor Alvin Brown serves up pension reform plan on first day of talks

Fund won't budge on additional city appointee to pensions board

Dede.Smith@Jacksonville.com Chris Hand (standing), the mayor's chief of staff, makes a proposal on pension reform Tuesday to the Police and Fire Pension Fund.

Dede.Smith@jacksonville.com John Keane, executive director and administrator of the Police and Fire Pension Fund, listens to the discussion at the Tuesday meeting.

The opening day of talks between Mayor Alvin Brown and the Police and Fire Pension Fund staked out sharp differences in their quest to reach agreement on pension reform.

Brown is seeking to give the city the power to appoint three of the five members of the fund’s board. John Keane, executive director, said the current selection process is established by state law and is non-negotiable.

Brown also got pushback over his proposal to have any changes in pension benefits run through September 2017 and then have future talks shift to collective bargaining with unions.

The most contentious issue will be to what extent pension reform will change benefits for current police and firefighters.

Keane will give his proposals Thursday when the sides resume their talks in another public session at City Hall.

Despite the differences, both sides moved close to buttoning up an agreement on how to make changes in pension benefits for new hires, something they previously came together on last year in a pension reform proposal that City Council rejected on grounds it didn’t go far enough.

There also was a meeting of the minds on creating an investment advisory committee for the Police and Fire Pension Fund, which Keane said the fund is in the process of setting up. The main issue to be settled is how broad the oversight scope of the committee will be.

Former state senator Rod Smith, who is moderating the talks, said he wants to clear as many issues off the table as possible so talks can focus on areas such as the city’s proposal to cut pension benefits for current police and firefighters.

“That’s what the heart of the disagreement is right now,” said Smith, a Gainesville attorney.

Brown said the city’s annual contribution to the Police and Fire Pension Fund was $77 million when he began his term three years ago, and it’s on track to be about $154 million next year if nothing is changed.

He said the rising pension costs are unsustainable and they’re choking the city’s ability to provide services such as enhancing parks, libraries and downtown redevelopment.

“It’s really about the quality of life of the city,” he said. “It’s about what’s doing right for the taxpayers.”

Brown’s opening proposals mostly matched the concepts he unveiled in February in a meeting of a pension reform task force, which later endorsed his ideas for changing pension benefits of current police and firefighters. Those are:

■ Increasing the contribution police and firefighters make from their paychecks, going immediately to 8 percent from the current 7 percent, and then rising in phases to 10 percent after previous pay cuts are restored.

■ Future entrants into the Deferred Retirement Option Program would no longer get an 8.4 percent growth on pension payments going into DROP accounts. Instead, the growth would be the same as the fund’s actual investment returns, though DROP’s interest wouldn’t exceed 10 percent or be less than zero.

■ The 3 percent annual cost-of-living adjustment for pensions would be cut to 1.5 percent or the Social Security COLA — whichever is less — for benefits earned after the COLA change takes effect.

Chris Hand, chief of staff for Brown, said the benefit cuts are part of a reform package that is “fair and balanced. It protects taxpayers and respects the employees.”

Pension benefits are spelled out in an agreement that runs through 2030 between the city and the pension fund.

Brown wants to shift future talks into the collective bargaining arena after September 2017 in negotiations with unions.

Brown's proposal also said if the fund agrees to all the proposals put forward by the city, the city would agree to boost its annual contributions to $200 million a year to more rapidly pay down the $1.65 billion debt owed by the city to the fund.

But unlike the task force’s recommendation for a tax increase to generate roughly $50 million a year in extra pension payments, Brown didn’t specify how the city would be able to pay the higher contributions, other than it would be the City Council’s decision as part of the budget process.

“The mayor’s proposal this morning made that kind of an iffy thing — it depends on if the City Council wants to do it,” Keane said after the session ended. “We’re more interested in something stronger than that so it would require that contribution.”

In regard to changing the selection process of the board, Keane said the city tried to get the Legislature to give the city greater appointment power, but the Legislature refused this session. Keane said that makes it a moot point and it’s not productive to keep talking about it.

Currently, police elect one board member, firefighters elect one board member, and City Council appoints two members. Those four members jointly pick the fifth member.

Brown argues that payments to the Police and Fire Pension Fund are a huge part of the city’s budget and residents hold him accountable for that impact, so he should be able to appoint the fifth member to the committee. The pension reform task force agreed.

Smith challenged Brown and Keane to look at ways to craft a compromise that would satisfy concerns of fund members that a 3-2 majority of city appointees would politicize the board to their detriment.